Price volatility in the mortgage market will be increasingly exaggerated as more and more market participants "close-the- books" on 2010. With bonus checks already cut - few traders will see reason to increase their risk positions before the New Year.



Against this backdrop today's modest decline in the initial weekly jobless claims was nothing more than a temporary distraction for traders. Early news from the housing sector did nothing but confirm the general consensus among market participants that housing starts and new housing construction in general are going nowhere anytime soon.



The $858 billion tax-cut extension plan that passed the Senate yesterday has now moved to the House of Representatives and may be presented for a vote by the end of the day. One would think the likely passage of this bill is already priced into the market - but as squirrely as trading activity as been of late - there is a risk that this event could take another sizable hunk out of current rate sheet prices.